Vatican calls for global government to oversee markets

Vatican department says only a global government can rein in the 'equalities and distortions of capitalist development'

A Vatican department has called for the creation of a “global government” to keep the world’s financial markets in check.

The Pontifical Council for Justice and Peace released a 6,500-word document last week entitled “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority”.

Starting with quotes from popes over the past four decades, the document strongly criticises liberal economics, which it says “spurns rules and controls”. The financial crisis, characterised by “selfishness, collective greed and the hoarding of goods on a great scale” is “one devastating effect of [this ideology]”, it says.

It quotes Pope Paul VI, who “clearly and prophetically denounced the dangers of an economic development conceived in liberalist terms because of its harmful consequences for world equilibrium and peace”.

Citing Blessed John Paul II’s warning in 1991 of the risk of an “idolatry of the market” the authors of the report say that “a road must be taken that is in greater harmony with the dignity and transcendent vocation of the person and the human family”.

This road should be the gradual establishing of a “world political authority”, with broad powers to regulate financial markets and rein in the “inequalities and distortions of capitalist development”.

Such a supranational authority “cannot be imposed by force, coercion or violence, but should be the outcome of a free and shared agreement and a reflection of the permanent and historic needs of the world common good”, the document says, and that it should build on United Nations bodies. They emphasise that “this transformation will be made at the cost of a gradual, balanced transfer of a part of each nation’s powers to a world authority and to regional authorities”.

At a press conference launching the document, Cardinal Peter Turkson, president of the Pontifical Council for Justice and Peace, said “the basic sentiment” behind the Occupy Wall Street protests was in line with Catholic social teaching. “The Vatican is not behind any of these movements, but the basic inspirations can be the same,” he said.

Bishop Declan Lang, chairman of the Department of International Affairs of the Bishops’ Conference of England and Wales, said the document was “rooted in the Church’s deep concern for the global common good”. He said: “It is important the Church continues to engage with vital issues, such as the economic and financial crisis, affecting people around the world with the aim of encouraging a better future for all peoples.”

Cafod’s economist Christina Weller welcomed the document, saying: “As the G20 reverts to crisis mode and the woes of the eurozone elbow out pressing global issues of climate change, persisting global poverty, widening inequality and continued instability, the Vatican provides a timely reminder to world leaders of the need for greater vision, greater collaboration and real reforms if the world is to emerge stronger, better and wiser from the global economic crisis.”

But Prof Philip Booth of the Institute of Economic Affairs said that, while the document makes some interesting points, “the position falls apart on close inspection”.

He said the report “wrongly asserts that liberalism is a theoretical ideal divorced from reality. It is quite extraordinary, then, that the document will be proposing a world legal authority when the practical realities are that such authorities become captured by cliques and special interests and are rarely at the service of the people from whom they are so remote. Indeed, they often seem directly opposed to the very values for which the Church stands.”

He also disagreed with the document’s call for greater financial regulation. “If anything, systems of global financial regulation exacerbated the financial crisis because it led to many countries having the same failings in their banking systems at the same time. Indeed, many of the problems we faced were caused by attempts by financial institutions to get round regulations,” he said.

And he was critical of the proposal for a world fund to bail out banks. “Attacks on democracy are arising because of the perceived injustice of banks being bailed out at the expense of taxpayers. The creation of a world bailout fund would raise moral hazard and lead to more reckless behaviour in the financial system and certainly would be perceived as a major injustice by taxpayers,” he said.

Another Catholic economist, Prof Paul Dembinski, Director of the Observatoire de la Finance in Geneva, said he agreed with the document that “politics should be the checking power over the markets”, adding that “nation states have lost power to the markets”.

But Prof Dembinski said such a supra-national authority is “easily said but not so easily built”, considering the nationalistic preferences even within the European Union.